Cheap Always Loses

The other day I was talking to my friend Vicki Flaugher, founder of Smart Woman Guides about one of many Fortune 500 companies whose go to market strategy is price leadership. That doesn't leave many options.
You see it all around. 99 cent burgers. 79 cent tacos. In reality its price prohibitive to make a burger for 99 cents, so those companies take a loss on each one sold in the hopes they'll up sell you on a non-loss item, perhaps a super size drink.

In my opinion cheap always loses, because you can only go one direction: cheaper. One of my favorite Fast Company articles was written back in 2006, The Man Who Said No to Walmart. He walked in to make his pitch and the VP's office was furnished with plastic folding chairs left behind by another vendor as a demo. I read that article 4 years ago and I still have this crystal clear image of what he must have looked like awkwardly sitting in a crappy lawnchair in his suit, briefcase resting on his knees, knees positioned somewhere near his ears. Like a giant in a kids chair. What kind of an executive of a Fortune 500 company seats guests on plastic folding chairs? What does that say? "Dear God we're cheap. We are so cheap it literally hurts. Try it, sit down. Ouch. This chair sucks."

The Man Who Said No to Wal-mart said no because his company (Snapper) stands not for volume, but for quality, reliability, and durability. His product wasn't cheap. It was built to last. Their value proposition isn't price, it's performance and longevity. Even though he successfully ran his manufacturing operations much like Walmart ran its stores, with fastidious detail on each element of precision and productivity, he wasn't willing to sacrifice quality for price.

Business is about what you stand for: Value. Quality. Convenience. A fanatical obsession with customer service. It's also about where you are headed. Short term gains around pricing today can have huge long term consequences. How do you differentiate yourself in a noisy marketplace? Where do you want to be in 10 years? What are you going to doing today to get there? Who will you say no to? What will you do to preserve the values you hold dear? Will you turn down clients? Will you turn down money? Most likely you will. And if you lead your business with a strong moral compass, unwavering commitment to your core values, selfless dedication to your clients, customers, and stakeholders, and complete transparency your difficult decision will be rewarded with great success.